Investing Tricks


Some of best advice on investing (extracted from last Wednesday’s BT):

  • The much touted “diversification” and “wealth preservation” strategies do not build wealth. The rich use them to maintain wealth. You need a better strategy to be rich.
  • Buy when there’s weakness in the market. Buy when other people are panic-selling, or when there’s bad news. Examples of excellent buy opportunities in Singapore’s recent history: Asian financial crisis in 1997-98, September 11 terrorist attack in 2001, and the SARS scare in 2003.
  • Sell on good news. Sell when people are greedily buying. Some people think that now is the best time to sell, as assets have gone up in value and all good news have been factored into the prices.
  • Be patient and think long term.

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  1. The articles always advise people to sell on good news or when the economy is over-heated. However, I’m curious, what should one do with the cash when one liquidates one’s investments?

    Leaving it in the bank is silly considering inflation and the insulting interest payouts.

    Putting it in government bonds isn’t a solution either since it locks up your money and prevents you from entering the market (ppty or equity) when there’s an opportunity.

    Anyone care to enlighten me?

  2. There aren’t many options with the cash.
    We used to see interest rates adjusted upwards to cool a booming economy, but not anymore.
    Still, I’d rather put my cash in a savings account that earns the highest interest I can find (currently at around 2%), or short-term FD. Short-term bonds, whether corporate ones or government ones, aren’t that bad too.
    These are at least better than getting locked up in money-losing investments.
    Or maybe start a business? 🙂

  3. Diversification is trying to minimize risk and smooth out the returns using uncorrelated asset classes. Overtime, diversification does build wealth. Just putting $500 monthly into a diversified portfolio that yield a compounded annualized return of 8% will give you half a million dollars at the end of 25yrs.

    So, if you are 30yrs old now and is disciplined, you can look forward to a half-million dollars income at age 55yrs old. You can now work because you want to, not because you have to!

    Like your statement says… “BE PATIENT and Think Long Term”.

    Oh, but I don’t advocate Investment-Linked Insurance Policy. There’s better alternatives.

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